A short sale is a specific process of selling real estate. In case of short sale, the amount of money that one would procure after selling the property will be less than the amount of debt that the liens hold against that piece of property. In such cases, the property owners are not able to pay the full amount of debts to the liens under any possible circumstances. The liens agree on the amount available with the property sale, which is usually less that they had lent and release the lien on the property. The amount, which falls short to be paid, becomes the deficiency.
It should not be concluded that once the property is short sold, the borrower is not liable to pay the deficiency to the lenders unless otherwise formally agreed between both the parties. This process is often viewed as a foreclosure alternative. It is so because the extra costs and fees are mitigated towards both the parties of borrowers and creditors. This process often blotches the credit history of the property owners with a credit report that is negative.
A short sale will occur only when it can be proved that a borrower is having difficulty in paying the deficiency either economically or financially, towards the creditors. Many of the large creditors like banks have special departments to mitigate the loss procured by the amount of deficiencies. During the great recession of 2008, it was estimated that about 2.2 millions of short sales occurred in the US.